Company pension enrolments fall below 50 per cent

Sunday, 26 February 2012 10:46

New research from the Office for National Statistics (ONS) reveals that in 2011 less than half of all employees are saving into an employers’ pension.

These employees could be missing out on receiving the employer’s contribution to the pension as well as tax relief from both employee and employer contributions to the workplace schemes.

The ONS reports that just 48 per cent of all employees are enrolled in an employers’ pension scheme, the lowest rate since the ONS records began in 1997 when the level was 55 per cent.

There is a wide disparity between the number of public and private sector employees that have a pension with their employers. 83 per cent of public sector employees are in a pension scheme but just 33 per cent of private sector employees belong to one.

The ONS said that defined benefit pension schemes, which usually mean final-salary pensions, are the most common type of workplace pension scheme, despite it being widely acknowledged that these are unaffordable and being phased out to new employees by most companies.

The ONS says that the fall in the proportion of private sector employees joining an employers’ pension scheme is partly due employees realising that alternative schemes from defined benefit are not as generous.

The ONS said: "The fall in the proportion of employees with a workplace pension between 1997 and 2011 has been driven mainly by the fall in membership of defined-benefit occupational pension schemes over the same period, from 46% to 30%."

A higher proportion of private sector employees are paying into defined contribution schemes rather than defined-benefit schemes, said the ONS.

Darren Philp, NAPF Policy Director, said: "We've passed an important and worrying landmark. Less than half the workforce is now saving into a pension.

"While reform is coming to the public sector, the private sector has already seen a seismic shift in its pensions. Over the past decade, many final salary deals have come off the table to be replaced with newer ‘money purchase' pensions.

"Sadly, the fall in people saving into a final salary scheme has not been fully matched by interest in other types of pension. The weak economy and falling confidence in financial products have also spurred many private sector workers to quit pensions altogether.

The ONS takes a one per cent sample of all employee PAYE tax records for its analysis published as the Annual Survey of Hours and Earnings (ASHE).

The figures reveal that only once people hit 30 do they become more likely than not to start saving into a company pension.

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